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Australia Houses Overvalued

Australian house prices are 12% overvalued and could climb even higher, major investment bank Barclays has warned, AAP reported. Barclays Australia chief economist, Kieran Davies, came up with the finding using a model that compares factors, including household income, mortgage rates and the aging population. He says it is the third-largest estimated overvaluation of Australian house prices in the past 45 years. The previous occasions were a record 22% overvaluation in 2003, and a 14% overvaluation in 1989. On those occasions the Reserve Bank was lifting interest rates, whereas now the central bank has cut its cash rate to a record low 2%, Davies said.